Introduction
The introduction of credit cards in America in 1990 has brought both positive and negative effects to American society at large. Credit cards have made it possible for cardholders to make huge purchases, cater for emergencies such as medical bills as a result of accidents thereby making the cardholders able to fit into the middle-class American life. However, credit cards although they are convenient they have been associated with an increased number of bankruptcies in America since their introduction. The following are some of the effects experienced in America as a result of the use of credit cards.
Guarantee of payments
Through the introduction of credit cards, the merchants in America were guaranteed payments unlike earlier where the buyers were limited to taking out loans and buying on credits only in places where they were known. With the credit card, it is possible for total strangers to transact since a merchant only has to trust the card insurer thus eliminating the need to consider the trustworthiness of the buyer. Since the credit card acted as a guarantor against the risk the businesses in America proliferated for instance rental car companies could let people they know nothing about drive off with their cars, for catalog and internet companies to ship goods to people they’ve never met and have no reason to trust thus credit cards are considered as an essential tool that leads to the emergency of the global market.
Bankruptcy
According to the research by the center for responsible lending (2005) “credit card debt in America tripled since 1989 and there was a 31%increase in 2000 as a result there was over 1.8 million bankruptcies in 2004 owing to the introduction of credit cards”. Initially, an individual had to think about the amount of cash in the wallet as well as our income before purchasing any goods just to make sure you have enough to spend.
However credit cards have separated the moment of purchase from the moment of payment thus it is easy to spend thoughtlessly, where a lot of people threw money away on unnecessary purchases hence we can say credit card has rendered many Americans bankruptcy. According to Telvick (2004) “millions of Americans have used credit cards to drive themselves to the brink, or more and more into bankruptcy since the insurers of the Credit card are out to tempt consumers into carrying huge debt than their income, putting in mind that the availability of plenty and convenient credit gets most people in financial crisis since they are financially uninformed”
Preference for credit cards
Nellie (2006) “confirmed that undergraduates preferred credit card rather than federally guaranteed student loan which is more cost effective” this is because with the credit card it was much easier for the students to pay for college education expenses with a college, such as books, transportation, and tuition in some cases without necessarily having to undertake a time-consuming process of filing the appropriate forms and working through the financial aid and bursar’s offices, as well as with the lender to process the loan.
References
Center for responsible lending, 2005. Web.
Marylaine B. My words are worth “Credit Risk”.Vol 6. 2001. Web.
Nellie M. Educating Undergraduates on using Credit cards. New York: Macmillan Company, 2003.
Telvick. M. Examining The Issues of Credit Cards and Personal Responsibility. 2004. Web.